Can industry be the key to pro-poor growth? An exploratory analysis for India
This study is an important input into the discourse on the situation of the Indian manufacturing sector. Given the important role industry should play in the development process, there has been a long-running debate about the failure for manufacturing in India to take up a larger role in not just the growth story, but more importantly in job creation.
The results of this study show that in the Indian manufacturing sector, employment has grown relatively slowly in recent years. Wages per worker remained almost stagnant, while the remuneration per person shot up significantly, implying strong growth in the salaries per employee (excluding workers). Industries, which dominated in terms of employment share, did not necessarily experience faster employment growth. Nonetheless, there is a strong positive correlation between the average value added growth and total employment growth measured across all the three-digit manufacturing groups, implying growth is essential for employment generation. Regarding inter-industry linkages we may conclude that industrial deceleration in the heavy goods sector can reduce the input demanded from both labour- and capital intensive sub-sectors. The inter-temporal skill mismatch index, as estimated from the distribution of workers in each of the activities across various skill levels, is again substantial, indicating that over time jobs in manufacturing are becoming more skill-biased. Two key policy areas are highlighted: (a) priority to be given to industries that can contribute to employment growth; and (b) skill formation for improving the employability of workers.